May 31, 2024
A $250 million International Development Association (IDA)* credit has been approved by the World Bank for a five-year Ghana Financial Stability Project. By promoting financial stability through the recapitalization of banks and specialized deposit-taking institutions (SDIs) affected by Ghana’s Domestic Debt Exchange Program (DDEP), the project will support the country’s Financial Sector Strengthening Strategy (FSSS).
The financial system is essential to the operation of the Ghanaian economy because it supports economic growth and offers vital services to individuals, businesses, and the government. The government created the Ghana Financial Sector Stability Fund (GFSF) to support banks, pension funds, insurance companies, fund managers, and collective investment schemes with their solvency in order to alleviate the severe effects of the DDEP on financial institutions.
“This project will contribute to Ghana’s financial stability, by providing solvency support to banks and SDIs impacted by the DDEP through the GFSF.” said Robert R. Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. “Through direct support to banks and SDIs, the project will benefit Ghana’s financial sector and the economy by supporting the access of depositors and other financial consumers to savings, payments, and other core financial services provided by adequately capitalized banks and SDIs.“
The Ghana Financial Stability project is anticipated to provide immediate benefits to qualifying undercapitalized but viable banks and SDIs. It will also open up access to additional banks and SDIs in the future that might require assistance due to possible new losses and act as a safety net against unforeseen losses.
In order to increase the likelihood of long-term sustainable development and long-term resilience against shocks in the future, the World Bank Group is providing support. Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead, stated that the project “promotes financial stability, a key requirement to protect people and preserve jobs.”
The project is a supplement to the IMF-Extended Credit Facility and the World Bank’s Development Program Financing series, which support reforms to enhance the macroeconomic environment and allow financial institutions to function profitably and produce internal capital. It also supports other World Bank-funded initiatives in Ghana that are meant to revive the country’s economy and create jobs, like the Ghana Development Financing Project, which helped establish the Development Bank of Ghana and offers small and medium-sized businesses and small corporations long-term financing.
(Source: The World Bank)
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